Rating Manual section 6 part 3: valuation of all property classes

Section 1000: historic properties

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This class will include properties occupied by The National Trust, English Heritage, Cadw, members of the Historic Houses Association, charitable trusts, other individuals and organisations. The principal purpose of occupation will be as a residence and/or the preservation of the fabric of the building, ruin or garden in an historical context.

1.1 This Section applies to the following types of property:

i.premises which comprise a “stately home” where, despite that description, the principal use is non-domestic (e.g. occupied by the National Trust or English Heritage). There may be living accommodation for a caretaker, or similar, within the hereditament (in which case it will be a composite hereditament) but the principal use will remain non-domestic;

ii.premises where the principal use is as a residence but where the house is also open to the public (e.g. those houses occupied by members of the Historic Houses Association) and/ or may include use for functions (including weddings) or even offer letting accommodation.

iii.dwelling houses of famous personages maintained solely for public viewing (e.g. Beatrix Potter, John Wesley houses);

iv.gardens open to the public where they are of national significance or are occupied by the National Trust, English Heritage or Cadw (additional guidance on gardens open to the public may be found in RM : Section 6 : Part 3 : S 1085 Leisure Attractions Section 1085 : Leisure Attractions

v.other historic buildings including the remains of priories, abbeys, windmills, towers, forts etc.

vi.Royal Palaces open to the public

1.2 Historic Properties occupied as Museums

Occasionally, historic properties are occupied as museums. The items on display are not intended to “show” the property and may have no connection with the property. The property is merely suitable accommodation for the display of artefacts. Such hereditaments should be treated as museums and assessed in line with Rating Manual section 6 - part 3 - section 715.

2. List Description & Special Category Code

List Description: Historic Property and Premises

Primary Description Code: LX

SCAT code: 265, suffix S

Where only the garden (of national importance) is open to the public and it forms part of a composite hereditament the description should be “Show Gardens and Premises”.

If the garden itself is the attraction and it is neither of national significance nor occupied by the National Trust, English Heritage or Cadw then Scat Code 284 (Leisure Attractions) should be used with a suffix of S or G as appropriate. The valuation of these gardens should follow the guidance on Leisure Attractions to be found in Rating Manual – Section 6: Part 3: Section 1085.

This guidance will also apply to Royal Palaces where the Scat Code 240 should be adopted with the suffix letter N.

3. Responsible Teams

Historic properties, which includes gardens of national importance, are a Specialist class of hereditament to be dealt with by the Unit Specialists.

All Royal Palaces are the responsibility of the National Specialist valuers in the National Specialists Unit.

4. Co-ordination

The Historic Properties Class Co-ordination Team has overall responsibility for the co-ordination of this class. The team are responsible for the approach to and accuracy and consistency of valuations. The team will deliver a Practice Note describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers and referencers have a responsibility to:

  • follow the advice given at all times
  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team
  • seek advice from the co-ordination team before starting on any new work

Responsibility for effective co-ordination within each Unit lies with the Unit Specialists.

5.1 Unit of Assessment

VOs will need to identify the unit of assessment having regard to the usual rules of rating. This is particularly relevant where the occupier is a charity but trading companies may be operating from the hereditament (see paragraph 5.5 below).

5.2 Significant detriment test

Generally, two or more parts in one occupation separated by a public road should be treated as separate hereditaments. However, if it is evident that one part cannot be separately let/occupied without significant detriment to the other part then it may form a single hereditament. Refer to RM: S3: P1 (Occupancy and the Hereditament).

5.3 Occupied for wholly different purposes

Furthermore, property in the same occupation may fall to be assessed as two or more hereditaments if the two parts are used for wholly different purposes (see North Eastern Railway Co. v York Union (1900) 1 QB 733). General offices at a railway station (which were concerned with the whole railway rather than just the station where they were located) have been held to be a separate hereditament to the station as they are used for wholly different purposes (Re Southern Railway Company (1935) 6 DRA 177). Whether separate assessments at historic properties occupied by one organisation are appropriate will depend on the facts of each case but, as general guidance, the following may require separate assessments:

  • offices and administrative facilities (such as training centres) where the use is not primarily concerned with the historic property itself (e.g. head offices or regional offices of the National Trust, or English Heritage or the leisure and museum departments of local authorities)
  • catering and retail facilities outside the pay boundary of the historic property where it is likely that a significant proportion of customers will not visit the historic property (e.g. National Trust shops and restaurants in towns and villages)
  • property used for the provision of short stay accommodation or self-catering lets and associated ancillary accommodation, and
  • property used mainly for commercial purposes unconnected with the heritage of the property (such as horse trials or conference let outs).

5.4 Separate Letting

In the case of additional facilities let to and occupied by separate individuals these must also be assessed separately.

5.5 Trading Companies/Charity Occupations

The rateable occupier for many historic properties may be a charity. In such cases some or all of the trading operations are likely to be run by separate, though wholly owned, trading companies set up by the charity for that specific purpose. The charity and trading company are required by law to be separate corporate entities, with an arm’s length agreement between them when one occupies the property of the other. Where the trading company meets the normal rules of rateable occupation for any building or part of a building within the site then a separate hereditament will usually be created.

Where smaller properties are occupied by an independent charity there is likely to be only limited sales or trading and in such cases there may not be a trading company in existence. Even where a trading company exists it often only occupies a sales stand or café area within a larger room and a separate hereditament may not be identifiable. Where a separate hereditament cannot be defined then there will not be a separate assessment.

To decide whether there should be a separate assessment for a trading company it will be necessary to consider the following questions:

  • Is the occupier of the property a charity?
  • Does the charity have a separate trading company?
  • Does the trading company operate from the property being considered?
  • Is the part of the site or building occupied by the trading company capable of definition as a separate assessment (e.g. a shop, a café, an outdoor sales area)?

5.6 Composite Hereditaments - Domestic/Non-Domestic Borderline

The hereditament will be composite unless the circumstances of occupation suggest that it is either wholly non-domestic or wholly domestic. Regard should be had to Rating Manual section 3: part 1 (Occupancy and the Hereditament) and Rating Manual section 3 - part 5 (Composite Hereditaments).

5.7 De minimis

VOs should take a reasoned view of what comprises ‘de minimis’ non-domestic use of the living accommodation.

Frequency of use

Whilst each case must be determined on its own merits, in deciding whether the use of a domestic property for non-domestic purposes is material the VO will need to have regard to the effect of the extent, frequency and intensity of the non-domestic use and to any modifications made to the property to accommodate that use.

It is difficult to be specific on this point as circumstances will vary. Where, for example, a house is only open by appointment the non-domestic use would probably be de minimis. The very existence of an appointments system would enable the occupier to organise opening times to cause minimal inconvenience, whereas the occupiers of properties with specified opening times would need to organise their lives around those times. It is unlikely that the hereditament would be composite and consequently rateable where the house (or its garden) is only open for a handful of days, or where it opens less than 28 days as a condition of a grant award or tax relief, or the garden only opens as part of the National Garden Scheme. However, the number of open days is only one of several items to be considered. For instance, rooms which are open to the public but have not been adapted and are otherwise used by the family for domestic purposes and, in addition, no special provision has been made for visitors’ cars, are unlikely to be non-domestic. However a civil licence, or regular corporate use is likely to be firm evidence of non-domestic use in the majority of circumstances.

Account will also need to be taken of any other non-domestic use, such as the holding of functions including weddings, banquets, exhibitions or such like.

Where only limited and infrequent use is made of the living accommodation, the garden or grounds for non-domestic purposes and the accommodation reverts to domestic use between non-domestic usage, and there have been no adaptations for non-domestic purposes, then it is likely that such non-domestic use would be treated as ‘de minimis’.

5.8 NIL Assessments

Hoare (VO) and Spratling (VO) v The National Trust 1998 RA 391

This case concerned two stately homes occupied by the National Trust (Petworth House and Castle Drogo). The Lands Tribunal found as a fact that the only hypothetical tenant for the properties was the National Trust. Therefore, the Court of Appeal considered it was necessary to decide how much rent the National Trust themselves would pay under the rating hypothesis for the hereditaments. The Court of Appeal considered that where there was only one possible hypothetical tenant, the known policies of that hypothetical tenant should be taken into account. They called this the principle of reality (Gibson at 415).

The Court of Appeal accepted that the National Trust would not take a property unless it was accompanied with sufficient endowment to ensure that their own central resources were unaffected. Under the principle of reality, this known policy of the hypothetical tenant (as the only hypothetical tenant was the National Trust) had to be included in the considerations. This was sufficient evidence that, under the rating hypothesis, the National Trust would not pay a rent for the hereditament and, therefore, a nil assessment was appropriate.

5.8.1 Implications for the National Trust

It follows from the decision that many loss making historic properties where the only hypothetical tenant is the National Trust should be assessed at nil. However, this will not always be the case. The decision has less relevance for National Trust properties where, for instance, there is more than one hypothetical tenant or where the National Trust may, if it wishes, sell the property (i.e. it is not inalienable) or where rental evidence from a different use can be considered relevant. Such hereditaments may merit a substantive assessment and guidance as to valuation is provided in section 8 below, including National Trust properties that are capable of making a profit.

5.8.2 Implications for other occupiers

The National Trust had evidence that they would not pay a rent for the appeal hereditaments. For most other occupiers, and especially local authorities and English Heritage, such evidence is unlikely to exist. Indeed, in some cases evidence will exist that the hypothetical tenant would pay a rent. Therefore, the National Trust decision is unlikely to support nil assessments on other historic properties because:

  • the National Trust would not spend their own money on acquiring and maintaining loss making properties (they would only take a property if it came with sufficient endowment) which implies that they would also not pay a rent for loss making properties. Other occupiers will have chosen to spend their own money on a loss-making hereditament and this is good evidence that they would also choose to pay a rent,
  • the Court of Appeal considered that its decision did not compromise the doctrine of the overbid. Therefore, assessments that rest upon overbid - in particular those occupied by local authorities - are unaffected,
  • the National Trust could not sell the properties (they were inalienable). Most other occupiers can, if they wish, sell a loss-making hereditament. The fact that they do not supports the assumption that it is of value, and therefore they would pay a rent for the hereditament, and
  • the National Trust was the only hypothetical tenant - many hereditaments will have more than one hypothetical tenant.

Nevertheless, if the actual occupier is perceived as being the only hypothetical tenant of a loss making historic property and there is evidence that they would not pay a rent then a nil assessment may be appropriate. However, the Court of Appeal did say that the mere fact that the hypothetical tenant gives evidence that he would never pay a rent was not conclusive. Clearly, evidence from the ratepayer will be stronger if capable of independent verification.

6. Survey Requirements

Where practicable all buildings should be measured to Net Internal Area (NIA) in accordance with the VOA Code of Measuring Practice. Plans should be obtained of all parts open to the public together with details of those parts of the non-domestic assessment not open to the public. A note of the domestic parts of the hereditament should also be provided. It is essential that areas be recorded separately for all shops, restaurants, cafes, tea rooms, outside sales areas and function rooms.

Brochures should be obtained and dated where available.

The following information should also be recorded:

  • Entry charges including details of any concessionary rates, yearly rates, free admissions (e.g. gardens allowing Royal Horticultural Society members free entry);
  • Times and days of opening including details of any seasonal closures;
  • Details of any other facilities provided such as use for conferences and functions such as weddings or use of the grounds for concerts, car rallies or other events or the availability of caravan or camping facilities;
  • If the occupier is a charity details should be obtained of any trading company operating all or part of the property, e.g. shops and restaurants (see paragraph 5.5 above).

7. Survey Capture

All plans and surveys should be stored in the property folder on EDRM with the rating survey details captured on the non-bulk server.

8. Valuation Approach

8.1 Gross Receipts

Historic properties occupied with a view to profit, capable of being operated for profit or with a non-domestic element operated with a view to making a profit to offset against the overall costs of occupation, should (in the absence of reliable AVD rental evidence) be assessed using the actual receipts. A rental percentage should be applied to the AVD fair maintainable gross receipts from all sources excluding VAT and reflecting the physical circumstances at the material day.

Regard should also be had to expenditure which will often exceed the non-domestic receipts. However, difficulties are encountered if attempting to apportion costs between domestic and non-domestic parts and therefore a full R&E approach is likely to be inappropriate to arrive at the RV.

This approach identifies with the LT Scotland determination in Roxburghe Estates v Assessor for Scottish Borders Council case in respect of Floors Castle (LTS/VA/2002/3) where it was accepted that applying a percentage to the gross turnover to be a relevant, if crude, guide to the value of the occupation.

Where greater emphasis is placed on the non-domestic activities undertaken and the domestic element has less significance then consideration should be given to the hereditament being treated as a ‘function venue’ and reference made to [RM S6:P3:Section 255(]#).

8.1.1 Adjustment of Receipts for members visiting

Where the occupier is the National Trust, English Heritage, Cadw or a member of the Historic Houses Association, then the receipts require to be adjusted upwards to reflect members visiting (and therefore not paying for admission on the day). It is considered reasonable to assume that, in the absence of a membership scheme, one third of the members would still visit and pay the admission fee. “Free” visits to other properties by members of the Historic Houses Association will often be minimal.

8.2 Privately Run Historic Properties

The motivation behind the occupation of most privately run historic properties, which are primarily used as a home, will not be commercially driven. Instead occupation is likely to be attributable to the desire / aspiration to preserve the historic property and/or the lifestyle it affords. In such cases opening to the public and other non-domestic activity is carried out to provide an income to set against the inevitable maintenance and running costs of the occupation which will include long-term cyclical repairs. Therefore, the actual trading position of the non-domestic use provides the best guide to the rateable value.

8.2.1 Opening as a condition of Grant/Tax Relief

Of course, many such properties may be required to open as a condition of a grant award or tax relief but those which do so on a scale which moves the hereditament away from being wholly domestic (see paragraph 5.6 and 5.7 above) are likely to be concerned with making profit (surplus) to offset costs as well as satisfying the terms of the grant award or tax relief. Where it can be shown that the sole reason for opening the property to the public is to satisfy the terms of a grant award or to gain a tax relief, and the occupier derives no other benefit from the non-domestic use, then consideration should be given to whether or not this non-domestic use is de minimis. Otherwise, the actual trading position of the non-domestic use should be used to inform the rateable value of the composite hereditament. Guidance is provided in Part A below.

Part A: Privately run composite historic properties

Introduction

A1. The principal use of a privately run composite historic property is likely to be as a home. However, circumstances may arise where distinct portions of the premises may become occupied for either ‘domestic’ or ‘non-domestic’ use. Subject to the legal entities in occupation, this may give rise to the premises no longer being composite.

The rateable value of a composite hereditament is “an amount equal to the rent which, […], would be reasonably attributable to the non-domestic use of property” (paragraph 2(1A) of Schedule 6 to the Local Government Finance Act 1988). The non-domestic use in a privately run composite historic property will, most likely, be undertaken with a view to some profit (surplus) to offset total costs of occupation. Therefore, in the absence of rental evidence, the rateable value should be found by reference to the receipts in respect of that non-domestic use.

A2. The following points are relevant to this class of property and their nature as composites.

Income

A3. Regard should only be had to income that can be associated with the non-domestic use of the hereditament. This is likely to include:

  • admissions,
  • retail and catering sales, and
  • other functions and corporate activities, providing such use has not been separately assessed.

A4. Revenue grants, legacies and donations that the hypothetical tenant could reasonably expect to receive may be considered provided they are in respect of the non-domestic use. However, in many cases, such payments to historic properties, whilst they may carry a condition of the house being open, are made in respect of the domestic use of the property as a home (such as for the property’s maintenance) and should be disregarded.

Expenditure

A5. In line with the treatment of income, usually regard should only be had to expenditure that can be associated with the non-domestic use of the hereditament. Where the hereditament is primarily a home, as a general rule, any expenditure that would still be incurred in the absence of the non-domestic use should be treated as associated with the domestic use and ignored when considering the value of the non-domestic part. However, where a clearly defined part of the property is primarily in non-domestic use, and that use is not merely incidental to the domestic use of the hereditament, then expenditure on that part may need to be apportioned between the domestic and non-domestic use. This expenditure would include long-term cyclical repairs where appropriate which will reflect the size, age and construction of the property but are always likely to be greater for Grade I or Grade II* listed properties.

Nevertheless, apportioning costs will inevitably encounter difficulties and attempting a full R&E valuation would be likely to produce a negative result due largely to the high repairing, insurance and other expenses necessary to maintain the premises.

In isolation, a lack of profitability should not, however, be regarded as a pointer to a ‘de minimis’ or nil rental value (RV) due to there being other motives for occupation.

8.3 Other Historic Properties

Many other historic properties, which do not come within paragraph 8.2, are also neither operated for profit nor capable of being operated for profit. The motivation of the actual occupier is not profit or income - they are motivated by different factors such as heritage, conservation, education or social and economic benefits. If these benefits were not present in sufficient quantities then organisations such as English Heritage or local authorities would not occupy many of their historic properties. The same motivations would make it more likely that the hypothetical tenant (who may be the actual occupier) would pay a rent to secure the hereditament. Guidance on the valuation of these hereditaments is provided in Part B below.

Part B: Historic Properties, not used as a residence, which are not capable of being operated for profit

Introduction

B1. In general terms, hereditaments which are not capable of being operated for profit and on which there is no evidence of rents fall to be valued using the contractor’s basis. However, the contractor’s basis will not be suitable for most historic properties. This does not distract from any evidence that a substantive rateable value is still appropriate (see paragraphs 5.8.2 and 8.3) but it does mean that an alternative approach to valuation is needed.

Factors relevant to the hypothetical tenant

B2. In considering their rental bid, the hypothetical tenant would weigh up the benefits that they expect to receive from occupying the hereditament. The motivations behind the occupiers of these types of historic properties (and motivations behind the hypothetical tenants) are matters such as education, heritage, conservation and social and economic benefits. The hypothetical tenant would look at all the relevant information available in judging to what extent the hereditament could meet these benefits. A number of factors would influence the rental bid (all of which should be considered) but one of the most important will be the number of expected visitors. The greater the number of visitors, the more likely it is that objectives such as the preservation of the heritage, education and social and economic benefits can be achieved.

B3. Several factors other than visitor numbers would influence the rent. They include:

  • the importance of the property to the occupier (the most likely hypothetical tenant). Most hypothetical tenants will be concerned with the preservation of the physical building and its heritage. The status of the house in this context would, therefore, influence the rental bid,
  • the amount and range of accommodation on show. The size of the accommodation being assessed will have less relevance than for other sectors but will still be relevant. A stately home which illustrates a full picture of life in the house would be more valuable to the hypothetical tenant than one which shows only a small aspect, and
  • the income and expenditure of the hereditament. No hypothetical tenant will have limitless resources and even though the property will not be occupied for profit, the tenant will still have some regard to the trading position. A particularly high running cost may have a downward pressure on the value within the range whereas a low running cost may have an upward pressure.

B4. The rateable value adopted should have regard to these together with any other pertinent factors and follow the valuation scheme set out in the relevant Practice Note. It is difficult to say whether the hypothetical tenant would charge for entry, although that is likely, so, for consistency, it should be assumed that a charge for entry would be made by the hypothetical tenant. Where there is a membership scheme or a free entry policy it is reasonable to assume that one third of visitors actually entering free would still enter if they had to pay. For example, the visitor numbers at a site with 100% free entry should be reduced by two thirds.

Evidence from other mode or categories of use

B5. Whilst there may be little direct rental evidence for historic properties, there may be other helpful rental evidence in the locality. All relevant evidence may be used in assessing the rateable value and it is for the valuer to judge the weight to be given to evidence of rents or assessments of hereditaments in others uses. This may be particularly relevant in a class such as historic properties where there is little direct rental evidence. Regard should be had to the Court of Appeal decision in Williams (VO) v Scottish & Newcastle Retail Ltd and Another (2001 RA 41) with particular reference to the levels of rents paid by different uses.

9. Valuation Support

All valuations should be entered onto the Non-Bulk Server (NBS) under the relevant Scat Code. The input of factual data on the NBS will enable valuations to be carried out which follow the recommended valuation approach.

Additional support is available through:

  • Survaid
  • Class Co-ordination Team for Historic Property

Practice note: 2017 - Historic properties

1. Market Appraisal

As a visitor attraction, historic properties remain popular but face fierce competition from other leisure attractions which offer new technology such as interactive rides, games and educational facilities.

In response, historic properties have moved towards a more “family friendly” experience and introduced some new technology where possible. Often visitor “rules” have become slightly more relaxed and hands-on opportunities are offered where appropriate. Increased use of “special events” combined with the addition of adventure playgrounds at some venues as well as a generally improved catering and shop facilities has widened the offer and increased visitor ‘stay’ times all helping to boost receipts.

Where possible many venues have diversified providing function and/or conference facilities with some properties offering accommodation, usually self-catering holiday lets but occasionally on a bed and breakfast basis. In some extremes cases of privately owned historic houses, the family may now reside in part of the mansion (separate apartment or wing) with the remainder being used entirely for non-domestic purposes.

Although receipts may have increased costs have also risen, often at a greater pace. For many operators their volunteer workforce is hugely important. In 2013/14 the National Trust, with 4.1 million members and 19.9 million visits to ‘pay-for-entry’ properties, relied increasingly on over 60,000 volunteers who gave more than 4 million hours of their time in a wide range of roles. Even so, the National Trust fundraising from various sources was down 20% on 2012/13 due in part to a reduction in legacy income which has been the trend over the last few years.

Many historic properties have introduced the “Gift Aid on Entry” scheme offering non-member taxpayer visitors the choice of a Gift Aid admission ticket or a standard admission ticket. Under this scheme the Gift Aid admission ticket includes a voluntary donation of 10% or more and enables the operator to reclaim the tax paid on the whole ticket price. This provides an additional boost to receipts at participating properties.

2. Changes from the last Practice Note

There are no changes to the broad principles followed for the 2010 Rating Lists.

However, on 1 April 2015 the government’s heritage advisor, English Heritage, was split into two separate organisations: i.a new charity, retaining the name English Heritage, with responsibility for managing the National Heritage Collection of more than 400 historic properties and sites and, ii.a non-departmental public body, Historic England, dedicated to offering specialist expert advice and setting policy, promoting constructive conservation and providing support with research, guidance and grants.

As a charity, English Heritage will be in a position to offer an improved experience for visitors, increase visitor numbers and grow membership.

As a result of the division of English Heritage from 1 April 2015 occupation by English Heritage (the charity) no longer benefits from s65A, Local Government Finance Act 1988 which enabled the former English Heritage, a Crown occupation, to have a single rating assessment to cover all aspects of the occupation regardless of mode or category. Since 1 April 2015 occupation by English Heritage’s trading arm and self-catering accommodation on a site will form separate hereditaments where appropriate. Section 5.5 of the main Rating Manual section provides further guidance.

3. Ratepayer Discussions

For R2017 central discussions once again took place with agents acting for ratepayers and advising the National Trust, English Heritage and the Historic Houses Association. Positive views were received on the 2010 list approach, it was agreed that the property classification bands adopted for the 2010 list should continue to be used for 2017.

The guidance below reflects many views expressed and whilst it cannot be taken as a formal memorandum of agreement it is expected that the majority of ratepayers’ agents will not seek to challenge the content of this practice note nor the valuation approach to be adopted.

4. Valuation Scheme

In previous rating lists various valuation schemes have existed for multiple occupiers such as the National Trust, English Heritage and Cadw. There have been different approaches to the assessment of each of these and charitable trust occupations of historic properties.

In part these differences arise from the unit of assessment, in that

1.The National Trust, English Heritage and other charitable occupiers frequently have parts occupied by their associated trading companies – commonly shops, restaurants and plant sales. Where a hereditament can be identified which is occupied by a separate legal entity (e.g. a trading company) then this constitutes a separate assessment. In addition, National Trust properties commonly have RV £Nil assessments reflecting the repairing liability of the large mansion house element and the inalienable nature of the properties - this assessment usually includes the café/restaurant element, whilst the shops, occupied by their trading company, are separately assessed; 2.Private properties or gardens open to the public are likely to be composite hereditaments occupied by the owner; 3.The majority of other charitable trust occupations currently remain as single assessments but these may be subject to review if a trading company is found to have been created.

Thus with the varying units of assessment it is not currently possible to consider direct “like for like” comparisons between rating assessments of similar properties that happen to be in a different occupation.

As for the 2010 Rating Lists English Heritage and Cadw have been classified into category types for the 2017 Rating Lists as set out below:

A No entry charge ("humps & bumps" and sites of small ruins).
B Castle, fort or other ruins, plus admission kiosk.
C Castle, fort or other ruins, including some weather-tight accommodation within the fabric of a building and/or small shop, tearoom or exhibition.
D Castle, fort or other ruins, including substantial new visitor facilities with/without shop or tearoom.
E Industrial monument, Christian heritage, Military and Historic property, either vacant or set out to reflect former use, with/without small shop; tearoom or exhibition.
F Stately home / large historic house with property specific collection
G Garden
H Museum/gallery within historic property
O Operational property – e.g. administrative offices

4.1 The 2017 valuation approach for non-composite properties, and composites where the owner does not reside in the domestic part, is as follows:

To ensure correct relativity across the various permutations of occupation/separate assessment, the valuations for these properties for R2017 will be built up of two elements using the above categories (A-O)

1.A value for the historic property or garden alone – which will then allow for easy comparison between sites, and 2.An addition to reflect any additional income streams that will be within the same assessment e.g. shop/kiosks/cafes/plant sales or value-significant museum or exhibition space.

Stage 1 – the first element, historic property or garden only
4.1.1 Category A

Those properties correctly falling into existing Category A (No entry charge -“humps & bumps” and sites of small ruins) do not satisfy the tenets of rateable occupation and will not require entries in rating lists.

4.1.2 Categories B – E

For loss making properties and those that show only a cyclical, or one-off profitability:

Minimum value £500 “basic” RV – this will include those sites with, at best, only a small kiosk, hut, “hole in wall ticket sales” etc. and WCs

£1,000 “basic” RV – this will include those sites which additionally have some fully serviced accommodation for staff use/ticket sales/admin offices/sales etc.

4.1.3 Category F - large historic houses.

National Trust properties generally fall to be assessed at Nil RV, following the Court of Appeal decision in Hoare (VO) and Spratling (VO) v The National Trust 1998 RA 391. This decision flows from the agreed concept that the National Trust was the only conceivable occupier for these inalienable properties therefore it does not follow that similar properties in other occupations should be taken as RV £Nil.

Given the repairing and running costs, rarely, if ever, will such a property produce a commercially viable trading profit. They are open to the public for a variety of reasons, dependent on the nature of the occupier. In the case of privately owned property this is usually to mitigate the costs of maintenance. Thus they will have a positive value, albeit a relatively nominal one, dependent on the size and nature of the property and the visitor numbers attracted. The approach to these should have regard to Section 8 of the main Rating Manual section and paragraph 4.3.2 below.

Basic RVs should start at £1,000 and are often unlikely to exceed £10,000.

4.1.4 Category G – Gardens

Where the hereditament comprises a garden of historic or national interest, it is likely that a trading company would be in occupation of any shop which will therefore be likely to form a separate assessment, possibly including any café or restaurant element. Most heritage gardens will show an operating loss, or at best a nominal trading profit. On the rare occasion when a heritage garden will be commercially viable as an attraction it should be assessed in accordance with paragraph 4.3.1 below. In the absence of any meaningful rental evidence or trading profit it is necessary to look elsewhere for the valuation.

There has been no challenge to the concept that heritage gardens have value and that the assessments should not be nil. This acknowledges that there are operators in the market prepared to pay a rent to occupy a prestigious, albeit loss making, garden. Having regard to wider examples of percentage bids applied to low profitability, or loss making classes, a reasonable expectation would be within the range of 2% - 3% of Fair Maintainable Trade (FMT), gross receipts excluding VAT, dependent on the size, nature and turnover of the individual property.

It will be necessary for the specialist valuer to take a “stand back and look” approach taking into account all the factors affecting the individual property and similar comparable gardens. It is unlikely that a rateable value would be below £1000, with the majority in the range £5,000 - £20,000.

Properties in this category are extremely rare, valuations should be based on the merits of each case and having regard to the guidance given for museums and art galleries in RM S6: P3: S715.

4.1.6 Category O – Operational Properties

These will fall to be assessed on the local tone for the type of property concerned (e.g. offices, warehouses).

Stage 2 - the second element, additions

4.2 Where there is exhibition/museum space within the hereditament (usually English Heritage and Cadw properties) an addition in the range £500 - £5,000 should be made depending on the size and quality of the space.

The minimum of £500 will be for small museums of excavation finds, e.g. Wall Roman site, and the maximum £5,000 for large exhibition spaces, e.g. Battle Abbey, Whitby Abbey.

An addition for non-separately assessed shops, cafes/tearooms etc. should be made in RV £250 bands being broadly based (rounded) from 2% of FMT, net of VAT: FMT up to £24,000,addition nil (included in basic £1,000), FMT between £24,000 - £36,000, addition £500 RV, FMT between £36,000 - £48,000, addition £750 RV, FMT between £48,000 - £60,000, addition £1,000 RV and so on.

Car parking: generally this is reflected in the basic RV - an addition should only be made for car parks where a charge is made, due to its position close to a town centre or where used as a car park for walkers etc., which generates income over and above that from visitors to the historic property.

Self-Catering Holiday lets: this is a separate and distinct use therefore such accommodation will typically be separately assessed. Any within the curtilage of a National Trust, English Heritage or Cadw property should be assessed having regard to the local tone for such separately assessed properties and, where located within the historic property itself, to the costs in maintaining that part of the property.

4.3 Exceptions

4.3.1 Commercially Viable Properties

Where the property is commercially viable the assessment should be arrived at by applying a rental percentage, taken from the range derived from receipts and expenditure analysis, to the adjusted AVD receipts from all sources (excluding VAT) and reflecting the physical circumstances at the material day. Examples may include the English Heritage properties Stonehenge, Tintagel Castle, and Clifford’s Tower.

Any property that is commercially viable, and where the available accounts adjusted into the rating hypothesis produce a commercial level of profit, may also have the resultant RV checked and considered by reference to a full receipts and expenditure valuation. Such cases will be few.

4.3.2 Composite Properties occupied by the owner

These will normally be private historic houses or stately homes. The motivation behind most privately run historic properties, which are primarily used as a home, will be to make a profit to set against the overall running and maintenance costs of the house; these will include long-term cyclical repairs. Therefore, the trading position of the non-domestic use provides the best guide to the rateable value. The guidance in the main rating manual section 8. should be followed.

Usually the principal use is as a residence with the house also being open to the public but there are those where the commercial use dominates, the owner often only retaining a portion of the house. The non-domestic part will be open to the public but will often also be used for functions (including weddings) and/or corporate entertainment, conferences and such like. This may be in conjunction with significant other visitor attractions in the park, tearooms, restaurants etc. Care should be taken in the valuation of these properties to avoid taking into account costs attributable to the domestic occupation, or those of the greater estate.

It is to be expected that the assessments of these properties will normally be in the range of 2% - 5% of gross takings (excluding VAT)from all sources as at the AVD reflecting the physical circumstances at the material day. The rental percentage adopted must adequately reflect the actual physical features and characteristics of the hereditament and the preservation costs required. It follows therefore that Grade I or Grade II* listed properties will generally fall to be considered at the lower end of the rental percentage range.

If the non-domestic activities overwhelm the domestic element then the RV may be more accurately determined by assessing the hereditament as a ‘function venue’. See RM S6:P3: S255.

4.4 Historic Royal Palaces

The historic royal palaces open to the public should be valued in accordance with the above guidelines.

Appendix 1: Historic Properties

This Appendix has been approved and agreed on behalf of The National Trust and the Historic Houses Association.

Rating List Description

Hereditaments within this class should be described as “Historic Property and Premises”. The Scat Code is: 265S. Where only the garden is open to the public and it forms part of a composite hereditament the description should be “Show Gardens and Premises”. Additional facilities should be included as appropriate. Where the garden is itself the attraction and it is neither of national significance nor occupied by the National Trust, English Heritage or Cadw then Scat Code 284 (Leisure Attractions) should be used with a suffix of S or G as appropriate. Guidance on the valuation of gardens may be found in Rating Manual section 6: part 3 - section 1085.

Part A: Privately run composite historic properties

Introduction

A1. The principal use of a privately run composite historic property is likely to be as a home. The rateable value of a composite hereditament is “an amount equal to the rent which, […], would be reasonably attributable to the non-domestic use of property” (paragraph 2(1A) of Schedule 6 to the Local Government Finance Act 1988). The non-domestic use in a privately run composite historic property will, most likely, be undertaken with a view to profit. Therefore, in the absence of rental evidence, the rateable value can be found by reference to the receipts and expenditure in respect of that non-domestic use.

A2. Regard should be had to the general guidance in Rating Manual : Section 4 - Part 2 on the receipts and expenditure method. However, the following points are relevant to this class of property and their nature as composites.

Income

A3. Regard should only be had to income that can be associated with the non-domestic use of the hereditament. This is likely to include:

  • admissions,
  • retail and catering sales, and
  • other corporate activities, providing such use has not been separately assessed.

A4. Revenue grants, legacies and donations that the hypothetical tenant could reasonably expect to receive may be considered provided they are in respect of the non-domestic use. However, most such payments on historic properties, whilst they may carry a condition of the house being open, are made in respect of the domestic use of the property as a home (such as for the property’s maintenance) and should be disregarded.

Expenditure

A5. In line with the treatment of income, regard should only be had to expenditure that can be associated with the non-domestic use of the hereditament. Where the hereditament is primarily a home, as a general rule, any expenditure that would still be incurred in the absence of the non-domestic use should be treated as associated with the domestic use and ignored when considering the value of the non-domestic part. However, where a clearly defined part of the property is primarily in non-domestic use, and that use is not merely incidental to the domestic use of the hereditament, then expenditure on that part may need to be apportioned between the domestic and non-domestic use. This expenditure would include long-term cyclical repairs where appropriate.

Divisible Balance

A6. Taking the wholly non-domestic expenditure from the income should give a divisible balance to be shared between the landlord and the tenant. If a negative divisible balance is produced then it is likely that the reason for opening the property to the public is to satisfy the conditions of a grant or tax relief. In such cases consideration should be given to a nil assessment.

A7. It is likely that the hypothetical tenant would expect a significant percentage of the divisible balance. This is because, whilst much of the expenditure on the hereditament is not related to the non-domestic use, and therefore disregarded in reaching the divisible balance, the tenant is still responsible for the repair of the whole hereditament and would expect to use the profit from the non-domestic use to set against the costs of the domestic use (reflecting the position in real life).

Part B: Historic Properties, not used as a home, which are not capable of being operated for profit

Introduction

B1. In general terms, hereditaments which are not capable of being operated for profit and on which there is no evidence of rents fall to be valued using the contractor’s basis. However, the contractor’s basis will not be suitable for most historic properties. This does not distract from any evidence that a substantive rateable value is still appropriate (see paragraphs 6.4 and 7.3 of Rating Manual : Section 6 - Part 3 : Section 1000) but it does mean that an alternative approach to valuation is needed.

Factors relevant to the hypothetical tenant

B2. In considering their rental bid, the hypothetical tenant would weigh up the benefits that they expect to receive from occupying the hereditament. The motivations behind the occupiers of these types of historic properties (and motivations behind the hypothetical tenants) are matters such as education, heritage, conservation and social and economic benefits. The hypothetical tenant would look at all the relevant information available in judging to what extent the hereditament could meet these benefits. A number of factors would influence the rental bid (all of which should be considered) but one of the most important will be the number of expected visitors. The greater the number of visitors, the more likely it is that objectives such as the preservation of the heritage, education and social and economic benefits can be achieved.

B3. Several factors other than visitor numbers would influence the rent. They include:

  • the importance of the property to the occupier (the most likely hypothetical tenant). Most hypothetical tenants will be concerned with the preservation of the physical building and its heritage. The status of the house in this context would, therefore, influence the rental bid,
  • the amount and range of accommodation on show. The size of the accommodation being assessed will have less relevance than for other sectors but will still be relevant. A stately home which illustrates a full picture of life in the house would be more valuable to the hypothetical tenant than one which shows only a small aspect, and
  • the income and expenditure of the hereditament. No hypothetical tenant will have limitless resources and even though the property will not be occupied for profit, the tenant will still have some regard to the trading position. A particularly high running cost may have a downward pressure on the value within the range whereas a low running cost may have an upward pressure.

B4. The rateable value adopted should have regard to these and any other relevant factors. It is difficult to say whether the hypothetical tenant would charge for entry, although that is likely, so, for consistency, it should be assumed that a charge for entry would be made by the hypothetical tenant. Where there is a membership scheme or a free entry policy it is reasonable to assume that one third of visitors actually entering free would still enter if they had to pay. For example, the visitor numbers at a site with 100% free entry should be reduced by two thirds.

Evidence from other mode or categories of use

B5. Whilst there may be little direct rental evidence for historic properties, there may be other helpful rental evidence in the locality. All relevant evidence may be used in assessing rateable value and it is for the valuer to judge the weight to be given to evidence of rents or assessments of hereditaments in others uses. This may be particularly relevant in a class such as historic properties where there is little direct rental evidence. Regard should be had to Rating Instruction and Advice RAT070801 on the Court of Appeal decision in Williams (VO) v Scottish & Newcastle Retail Ltd and Another 2001 RA 41.

Practice Note 1: 2010 - Historic Properties

1. Co-ordination Arrangements

Historic Properties (which includes gardens of national importance) are a Specialist Rating Unit (SRU) Class. Responsibility for ensuring effective co-ordination lies with the Specialist Rating Units. For further information see Rating Manual section 6: part 1

The R2010 Special Category Code 265 should be used. As an SRU Class the appropriate suffix letter should be S.

For historic house used as museums reference should be made to Rating Manual section 6: part 3 - section 715 - museums and art galleries. Gardens not of national importance should be Special Category Code 284 (Leisure Attractions) and reference should be made to Rating Manual section 6: part 3 - section 1085.

This guidance will also apply to Royal Palaces Special Category Code 240. As an SRU class the appropriate suffix letter should be S.

2. Background

This class will include properties occupied by English Heritage (EH), Cadw, The National Trust (NT), members of the Historic Houses Association (HHA), charitable trusts, other individuals and organisations. The principal purpose of occupation will be the preservation of the fabric of the building, ruin or garden in an historical context.

In previous lists various schemes have existed for multiple occupiers such as EH, Cadw and NT. There have been varying approaches to the assessment of each of these and charitable trust occupations of historic properties.

In part this discrepancy flows from the unit of assessment, in that

  1. EH properties are single assessments covering all aspects of the occupation, regardless of mode or category (by virtue of section s65a, Local Government Finance Act (LGFA), 1988)
  2. National Trust and other charitable occupiers frequently have parts occupied by their associated trading companies – commonly shops, restaurants and plant sales. Where a hereditament can be identified which is occupied by a separate legal entity (e.g. a trading company) then this constitutes a separate assessment. National Trust properties commonly have Rateable Value (RV) £Nil assessments reflecting the repairing liability of the large mansion house element and the inalienable nature of the properties, with this assessment usually including the café/restaurant, whilst the shops, occupied by their trading company are separately assessed.
  3. Private properties or gardens open to the public are likely to be composite hereditaments occupied by the owner.
  4. The majority of other charitable trust occupations currently remain as single assessments but these may be subject to review if a trading company is found to have been created.

Thus with the varying units of assessment it is not currently possible to consider direct “like for like” comparisons between rating assessments of similar properties that happen to be in different occupation.

For the 2005 Rating List EH and Cadw were classified into category types with commercially viable properties being valued on a full receipts and expenditure basis, e.g. Stonehenge, Tintagel and Clifford’s Tower.

A No entry charge ("humps & bumps" and sites of small ruins).
B Castle, fort or other ruins, plus admission kiosk.
C Castle, fort or other ruins, including some weather-tight accommodation within the fabric of a building and/or small shop, tearoom or exhibition.
D Castle, fort or other ruins, including substantial new visitor facilities with/without shop or tearoom.
E Industrial monument, Christian heritage, Military and Historic property, either vacant or set out to reflect former use, with/without small shop; tearoom or exhibition.
F Stately home / large historic house with property specific collection
G Garden
H Museum/gallery within historic property
O Operational property – e.g. administrative offices

3. Valuation Approach for 2010 – Non-composite properties and composites where the owner does not reside in the domestic part.

To ensure correct relativity across the various permutations of occupation/separate assessment, the valuations for R2010 will be built up as two elements using the above categories

a. A value for the historic property or garden alone – which will then allow for easy comparison between sites, and b. An addition to reflect any additional income streams that will be within the same assessment e.g. shop/kiosks/cafes/plant sales or value-significant museum or exhibition space.

3.1 Stage 1 – Historic property or Garden only

3.1.1 Category A

Those properties correctly falling into existing Category A (No entry charge -“humps & bumps” and sites of small ruins) do not satisfy the tenets of rateable occupation and will not require entries in rating lists.

3.1.2 Categories B – E

For loss making properties and those that show only a cyclical, or one-off profitability (such as Beeston, Framlingham):

Minimum value £500 “basic” RV – this will include those sites with, at best, only a small kiosk, hut, “hole in wall ticket sales” etc and WCs

£1,000 “basic” RV – this will include those sites which additionally have some fully serviced accommodation for staff use/ticket sales/admin offices/sales etc.

3.1.3 Category F - large historic houses.

NT properties generally fall to be assessed at Nil RV, following the Court of Appeal decision in Hoare (VO) and Spratling (VO) v The National Trust 1998 RA 391. This decision flows from the agreed concept that National Trust was the only conceivable occupier for these properties and it thus does not follow that similar properties in other occupations should be taken as RV £Nil.

Given the repairing and running costs, rarely, if ever, will such a property produce a commercially viable trading profit. They are open to the public for a variety of reasons, dependent on the nature of the occupier. In the case of privately owned property this is usually to mitigate the costs of maintenance. Thus they will have a positive value, albeit a relatively nominal one, dependent on the size and nature of the property and the visitor numbers attracted. The approach to these should have regard to Appendix 1 to the Rating Manual section.

Basic RVs should start at £1,000 and are unlikely to exceed £10,000.

3.1.4 Category G – Gardens

Other than for any garden operated by EH it is likely that a trading company will occupy any shop and it will form a separate assessment, possibly including a café or restaurant. Most gardens will show an operating loss, or at best a nominal trading profit. On rare occasions a garden will be commercially viable as an attraction and should be assessed in accordance with paragraph 3.3.1 below. In the absence of any meaningful rental evidence or trading profit it is necessary to look elsewhere for the valuation.

There has been no challenge to the concept that gardens have value and that the assessments should not be nil. This acknowledges that there are operators in the market prepared to pay a rent to occupy a prestigious, albeit loss making, garden. Having regard to wider examples of percentage bids applied to low profitability, or loss making classes, a reasonable expectation would be within the range of 2% - 3% of Fair Maintainable Trade (FMT) dependent on the size, nature and turnover of the individual property.

It will be necessary for the valuer to take a “stand back and look” approach taking into account all the factors affecting the individual property and similar comparable gardens. It is unlikely that a rateable value would be below £1000, with the majority in the range £5,000 - £15,000.

3.1.5 Category H

Properties in this category are extremely rare, with valuations to be based on the merits of each case and having regard to RM Section 6 Part 3: S715: Museums and Art Galleries.

3.1.6 Category O – Operational Properties

These will fall to be assessed on the local tone for the type of property concerned (e.g. offices, warehouses), in most cases by local offices.

3.2 Stage 2 - additions

Where there is exhibition/museum space within the hereditament (usually EH and Cadw properties) an addition for this depending on size and quality should be made in the range

£500 - £5,000. The minimum of £500 will be for small museums of excavation finds, e.g. Wall Roman site, and the maximum £5,000 for large exhibition spaces, e.g. Battle Abbey, Whitby Abbey.

Addition for shops and non-separately assessed tearooms etc – to be taken in RV £250 bands broadly based (rounded) from 2% of fair maintainable trade, net of VAT

Up to £24,000 t/o nil (included in basic £1,000),

£24,000 - £36,000 t/o - £500 RV,

£36,000 - £48,000 t/o - £750 RV,

£48,000 - £60,000 t/o - £1,000 RV and so on

Car parking – generally this is reflected in the basic RV - an addition should only be made for car parks where a charge is made, due to its position close to a town centre or where used as a car park for walkers etc, which generates income over and above that from visitors to the historic property.

Self Catering Holiday lets will usually be a separate and distinct use and will typically therefore be separately assessed. Any within the curtilage of an EH or Cadw property should be included in a single assessment with the historic property in accordance with s65a, LGFA 1988; regard should be had to the local tone for such separately assessed properties and to the costs in maintaining the historic property.

3.3 Exceptions

3.3.1 Commercially Viable Properties

Any property that is commercially viable (i.e. where the accounts adjusted into the rating hypothesis produce a commercial level of profit) should be calculated by reference to a full receipts and expenditure valuation. English Heritage examples include Stonehenge, Tintagel, and Clifford’s Tower.

In the case of Heligan Manor Gardens (Lost Gardens of Heligan) the agreed RV £225,000 represents 7.5% of FMT and is supported by the rent passing.

3.3.2 Composite Properties occupied by the owner

These will normally be historic houses or stately homes. The motivation behind most privately run historic properties, which are primarily used as a home, will be to make a profit to set against the overall running and maintenance costs of the house; these will include long-term cyclical repairs. Therefore, the trading position of the non-domestic use provides the best guide to the rateable value. The guidance in the main rating manual section and appendix 1 to it should be followed.

Usually the principal use is as a residence with the house also being open to the public but there are those (usually large stately homes) where the commercial use dominates, the owner often only retaining a relatively small flat or portion of the house. The non-domestic part will be open to the public but also it will be used for functions and/or corporate entertainment, conferences. This may be in conjunction with significant other visitor attractions in the park, tearooms, restaurants etc. Care should be taken in the valuation of these properties to avoid taking into account costs attributable to the domestic occupation, or those of the greater estate. It is to be expected that the assessments of these properties will normally be in the range of 2.5 to 5% of gross takings from all sources.

4. Historic Royal Palaces

The historic royal palaces open to the public should be valued in accordance with the above guidelines.

5. IT Support

The development a new facility on the Non Bulk Server (NBS) should enable input of factual data to achieve valuations that follow the recommended approach for historic properties. All valuations should be entered onto the NBS under the relevant Scat Code